The Friendly Societies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1996

Modifications of the Friendly Societies Regulations

7.  After regulation 5 there shall be inserted the following regulations—

“Modifications of paragraph 1A of Schedule 19AB in relation to directive societies

5A.— (1) Paragraphs (2) to (11) below specify modifications of paragraph 1A of Schedule 19AB in relation to exempt business of a directive society.

(2) In sub-paragraph (1)—

(a) for the words “An insurance company carrying on pension business” there shall be substituted the words “A friendly society carrying on both tax exempt business and business other than tax exempt business”;

(b) for the words “its pension business” there shall be substituted the words “its tax exempt business”.

(3) For sub-paragraph (2) there shall be substituted the following sub-paragraph—

“(2) No repayment shall be made to a society in respect of any claim to a notional repayment; but the notional repayment shall be taken to be the amount of tax referred to in regulation 3(1) of the Friendly Societies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1996..”

(4) In sub-paragraph (3)—

(a) the words “Subject to sub-paragraphs (4) and (5) below,” shall be omitted;

(b) for the words “a company” there shall be substituted the words “a society”;

(c) for paragraph (a) there shall be substituted—

“(a) shall begin whenever—

(i) the society begins, at a time when it is carrying on only tax exempt business, to carry on business other than tax exempt business;

(ii) the society begins, at a time when it is carrying on only business other than tax exempt business, to carry on tax exempt business;

(iii) an accounting period of the society begins at a time when the society is carrying on both tax exempt business and business other than tax exempt business; or

(iv) a provisional repayment period of the society ends, at a time when the society is carrying on both tax exempt business and business other than tax exempt business; and;”

(d) in paragraph (b) for the words “the company”(wherever occurring) there shall be substituted the words “the society”.

(5) Sub-paragraphs (4) and (5) shall be omitted.

(6) In sub-paragraph (7)—

(a) after the words “section 432A” there shall be inserted the words “, as modified by regulation 7 of the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1992(1),”;

(b) for the word “company”(wherever occurring) there shall be substituted the word “society”.

(7) In sub-paragraph (8), in paragraph (a), there shall be inserted after the words “Management Act” the words “, unless the accounting period in question was one for which no notice as mentioned in subsection (1) of the said section 11 was served on the society”.

(8) For sub-paragraph (9) there shall be substituted the following sub-paragraphs—

“(9) In sub-paragraph (1) above “the appropriate portion” means—

(a) in so far as the payment is referable to business which is tax exempt business by virtue of section 460(1)—

(i) where the payment in question is either an amount of manufactured gilt interest received or an amount of real gilt interest received and is income arising from assets linked to tax exempt basic life assurance and general annuity business, the whole;

(ii) where the payment in question is an amount of manufactured gilt interest paid in respect of assets linked to tax exempt basic life assurance and general annuity business, the whole; and

(iii) in any other case, the provisional fraction; and

(b) in so far as the payment is referable to business which is tax exempt business by virtue of section 461(1) or 461B(1)—

(i) where the payment in question is either an amount of manufactured gilt interest received or an amount of real gilt interest received and is income arising either from assets linked to long term business other than life or endowment business, or from assets other than those of the society’s long term business fund, the whole;

(ii) where the payment in question is an amount of manufactured gilt interest paid in respect of assets linked to long term business other than life or endowment business, or in respect of assets other than those of the society’s long term business fund, the whole; and

(iii) in any other case the provisional fraction determined in relation to long term business other than life assurance business.

(9A) In sub-paragraph (9) above—

“tax exempt basic life assurance and general annuity business” shall be construed in accordance with the definition inserted in section 431(2) by regulation 5(2) of the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1992;

“long term business” shall be construed in accordance with the definition substituted in section 431(2) by regulation 5(4) of those Regulations; and

“life or endowment business” has the meaning given by section 466(1)..”

(9) In sub-paragraph (10)—

(a) after the words “section 432A” there shall be inserted the words “, as modified by regulation 7 of the Friendly Societies (Modification of the Corporation Tax Acts) Regulations 1992,”;

(b) for the words “the company’s long term business fund” there shall be substituted the words “the society’s long term business fund”.

(10) In sub-paragraph (13), for the words “the company” there shall be substituted the words “the society”.

(11) In sub-paragraph (15) there shall be added at the end—

“; and “tax exempt business” means any business of a friendly society the profits arising from which are exempt from income tax and corporation tax under section 460(1), 461(1) or 461B(1)”.

Modifications of paragraph 1A of Schedule 19AB in relation to non-directive societies

5B— (1) Paragraphs (2) to (10) below specify modifications of paragraph 1A of Schedule 19AB in relation to exempt business of a non-directive society.

(2) In sub-paragraph (1)—

(a) for the words “An insurance company carrying on pension business” there shall be substituted the words “A friendly society carrying on both tax exempt business and business other than tax exempt business”;

(b) for the words “the appropriate portion” there shall be substituted the words “the relevant fraction”;

(c) for the words “its pension business” there shall be substituted the words “its tax exempt business”.

(3) For sub-paragraph (2) there shall be substituted the following sub-paragraph—

“(2) No repayment shall be made to a society in respect of any claim to a notional repayment; but the notional repayment shall be taken to be the amount of tax referred to in regulation 3(1) of the Friendly Societies (Gilt-edged Securities) (Periodic Accounting for Tax on Interest) Regulations 1996..”

(4) In sub-paragraph (2)—

(a) the words “Subject to sub-paragraphs (4) and (5) below,” shall be omitted;

(b) for the words “a company” there shall be substituted the words “a society”;

(c) for paragraph (a) there shall be substituted—

“(a) shall begin whenever—

(i) the society begins, at a time when it is carrying on only tax exempt business, to carry on business other than tax exempt business;

(ii) the society begins, at a time when it is carrying on only business other than tax exempt business, to carry on tax exempt business;

(iii) an accounting period of the society begins at a time when the society is carrying on both tax exempt business and business other than tax exempt business; or

(iv) a provisional repayment period of the society ends, at a time when the society is carrying on both tax exempt business and business other than tax exempt business; and;”

(d) in paragraph (b) for the words “the company”(wherever occurring) there shall be substituted the words “the society”.

(5) Sub-paragraphs (4) and (5) shall be omitted.

(6) For sub-paragraph (7) there shall be substituted—

“(7) For the purpose of determining the amounts to which a society is entitled by way of notional repayments in the case of any accounting period, “the relevant fraction” in sub-paragraph (1) above means, subject to paragraph (b) of sub-paragraph (8) below, the fraction of which the denominator is the total investment income of the society and the numerator is the investment income of the society which is exempt from income tax and corporation tax under section 460(1), 461(1) or 461B(1) determined—

(a) for the latest preceding accounting period of the society at the end of which the society was required to make a valuation of the liabilities attributable to the whole of its insurance business and for which an inspector is satisfied that the society has supplied him with such information as would enable that fraction for that accounting period to be estimated with reasonable accuracy, and

(b) by reference to that information,

and any reference to “the relevant fraction” is a reference to the fraction so determined..”

(7) In sub-paragraph (8)—

(a) in paragraph (a), there shall be inserted after the words “Management Act” the words “, unless the accounting period in question was one for which no notice as mentioned in subsection (1) of the said section 11 was served on the society”;

(b) in paragraph (b), for the word “provisional” there shall be substituted the word “relevant”.

(8) Sub-paragraphs (9) and (10) shall be omitted.

(9) In sub-paragraph (13), for the words “the company” there shall be substituted the words “the society”.

(10) In sub-paragraph (15) there shall be added at the end—

“; and “tax exempt business” means any business of a friendly society the profits arising from which are exempt from income tax and corporation tax under section 460(1), 461(1) or 461B(1)”.”

(1)

S.I. 1992/1655, amended by S.I. 1993/3111.